Legal-Related Language in Collection Letters, and How N.D. Illinois Can’t Make Up Its Mind


There have been several court decisions to come down the pipeline regarding legal-related language and disclosures in collection letters. For example, the Southern District of New York recently dismissed a complaint where the crux was letter language that stated, “[Creditor] will send your account to an attorney for possible legal action” if a payment arrangement is not made. Even the Northern District of Illinois (N.D. Ill.) granted summary judgment for a debt collector whose letter stated “If the Account goes to an attorney, our flexible options may no longer be available.” However, it sounds like early dismissal of such cases—as we saw in New York—might not be as easy in N.D. Ill.

Editor’s Note: Want a full rundown of how the courts ruled on the issue of threats of litigation, with concise summaries of the decisions? Check out the iA Case Law Tracker

What happened?

In Soyinka v. Franklin Collection Serv. (N.D. Ill. Jul. 15, 2020), a collection agency sent a dunning letter to a consumer that stated, “If you are not paying this account, contact your attorney regarding our potential remedies, and your defenses, or call (###) ###-####.”

The letter doesn’t even mention litigation, and debt collectors are allowed to inform consumers of potential remedies, so any Fair Debt Collection Practices Act (FDCPA) claim alleging a false threat of litigation should be dismissed right off the bat, right?

Wrong, according to the judge in Soyinka.

The Court’s Decision

One of the main reasons the court denied the collection agency’s motion to dismiss is that in this jurisdiction, the question of whether a statement is false, deceptive, or misleading is a question of fact—meaning, a question for the jury. A motion to dismiss occurs far too early in the litigation process to warrant this treatment. (However, as mentioned above, the cases can be disposed of at summary judgment in favor of debt collectors.)

Despite that, the court delved into the facts. It found that “if only” the letter said “pay, contact your attorney, or call,” then there would be no problem. However, by including a settlement offer to “resolve” the account immediately before telling a consumer to contact their attorney about remedies and defenses, the letter may very well have crossed the line in this judge’s eyes:

The letter starts by offering a “settlement” to “resolve this matter.” Immediately after making that offer, the letter advises Soyinka, if she is not going to pay, to “contact your attorney regarding our potential remedies, and your defenses.” In combination, these sentences could communicate to an unsophisticated consumer the message that if she does not pay, then she will be sued. To begin, “settlement” is broadly understood by the public as a legal agreement used to avoid litigation. And similarly, even an unsophisticated consumer knows that “remedies,” “defenses,” and “attorney” are all terms used in litigation, and encountering them immediately after reading about a “settlement” offer could lead the consumer to believe that a lawsuit is coming—time to lawyer up. It is true that these terms could also be used to describe negotiation without resort to a lawsuit, but an unsophisticated consumer might not be able to figure that out. In cases of ambiguity—such as here—the case law says that the case must move on.

(Internal citations omitted.)

The court did note that two previous cases in the Seventh Circuit against this particular debt collector found nothing wrong with similar language, but pointed out that those letters did not use terms like “offer” and “settle.”

The court also found that a back-page disclaimer that an attorney has not yet reviewed the account does not change the fate of this motion to dismiss.

insideARM Perspective

One interesting factor that this court decision misses the mark on is the requirement that the threat be imminent for the claim to be viable under the FDCPA. Notably, the collection letter did not include a due date for the settlement offer, which means there was no hard deadline in the letter. And the legal language itself does not indicate any scintilla of imminence. The only potential time frame in the letter would be the 30-day window for the consumer to take advantage of his or her validation rights—but even the typical validation notice disclosure does not contain a reference to litigation. Even the consumer’s allegations, according to the court’s dicta, reference that legal action “is a possibility” with no reference to time frame or imminence.

In fact, eight different judges in N.D. Ill. disposed of claims alleging threats of litigation exactly for this reason—lack of imminence—at different stages of litigation (motion to dismiss, motion for judgment on the pleads, and summary judgment). The iA Case Law Tracker shows 8 different court decisions that match these parameters, all of which side with the debt collector on the threat of litigation issue.

This decision seems to be an outlier, and that is unfortunate.

Article by Katie Grzechnik Neill